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3 Strategies To Reduce Your Tax Burden Using Premium Financed Life Insurance

Save for retirement and provide for your heirs with the right life insurance plan

Life insurance is not only a useful tool for providing for your loved ones upon your death, it’s also a vehicle for building wealth and reducing your tax burden. 

Just like any other investment or tax strategy, it takes planning and expertise to find the insurance policy and structure  that will deliver the most value for you and your heirs. For high net worth individuals, premium financing is a powerful strategy that allows you to pay for life insurance and reduce the amount you pay out of pocket.

Here are three key ways that premium financed life insurance can help you reduce your tax burden while continuing to grow your wealth.

1. Accrue Interest Without Incurring New Taxes

When you invest money into a life insurance plan, that money will grow tax deferred. Rates will vary based on the type of insurance you choose and the terms of your specific policy.

‍This is one of the reasons why we recommend investing in a life insurance policy early in life. The longer the money sits in your life insurance plan, the more it will grow. And when you pair that with the lower premium rates that most people can get when they’re younger, life insurance can serve as a useful wealth-growing tool.

2. Withdraw Money During Retirement for Tax-Free Income

Many people don’t realize that you can actually withdraw money from your life insurance policy. In fact, doing so is a way to pay yourself an “income”  even after you retire. ‍

Unlike investing in a 401k, you don’t get an initial tax deduction when you purchase life insurance. But because of that, you don’t have to pay taxes when you withdraw from a life insurance plan. This can create savings of up to 400% on taxes over the life of the policy. 

With proper retirement planning, a life insurance policy can provide you with the funds you need to maintain your lifestyle without needing to pay exorbitant amounts in taxes.

3. Minimize Estate Taxes

For high-net worth individuals, a life insurance policy can also protect your heirs from having to pay high estate taxes.

In 2022, heirs are required to pay estate taxes on any amount over $12.06 million. However, money that’s invested in a life insurance policy is not taxed upon withdrawal. In fact, the death benefit from a life insurance policy can be a valuable tool for helping your heirs pay any estate taxes, especially if they’re inheriting a significant amount of illiquid assets.

If your policy is owned by an Irrevocable Life Insurance Trust or a limited partnership, the death benefit is paid out tax-free and could help eliminate or reduce estate taxes, and the ILIT can then pay the taxes quickly and easily.

Find the Right Partner to Build Your Premium Financed Life Insurance Policy

At Goheen Insurance, we know that every individual has unique assets, goals, and needs, so we work closely with you to structure a premium financed policy that will deliver the outcomes you desire.

Whether you’re looking to purchase life insurance for the first time, or you want to audit or restructure your current policy, we help you optimize your life insurance for the long term, factoring in things like retirement and estate planning.

Contact us today to schedule a consultation and get started!

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Life Insurance, Premium Finance, The Simplicity Company, Tips, Wealth Management


Meet Shawn Goheen, the heart and soul behind Goheen Insurance. Since the early ’90s, Shawn has been more than just a financial advisor; he has been a trusted confidant to high-net-worth individuals. His journey has led him to build strong connections with over 15 specialty lenders and insurance carriers, and relationships with 20+ banks, giving him a rare edge in navigating the often-complex financial world with ease and transparency.